Exchanges are stepping up their efforts to expand into indices and benchmarks to help them launch new derivatives products and profit from rising demand for passive investment.

Stock exchange operator Nasdaq OMX has seen the pitch book for Barclays’ Index, Portfolio and Risk
Solutions business and is likely to make a bid for the unit, a person familiar with the situation said.

The London Stock Exchange Group, via its FTSE International subsidiary, would also be interested in bidding for the Barclays unit, according to a person familiar with the matter.

The trend has been highlighted by LSE’s bid to buy asset manager and index provider Russell Investments, made public last month. Analysts believe it could reach $2.8 billion.

In a series of interviews with Financial News, executives from some of the world’s biggest exchanges have said they want to get deeper into indices.

Jeffrey Sprecher, chief executive of Atlanta-based IntercontinentalExchange, the world’s largest derivatives exchange, raised the prospect of extending his firm’s index business – acquired as part of its takeover of NYSE Euronext – to other countries. Sprecher said: “There is a demand for better benchmarking and the exchanges are being drawn into this.”

ICE recently took over the running of interest rate benchmark Libor and is also set to become the administrator of swaps benchmark Isdafix.

Bob Greifeld, chief executive of Nasdaq OMX, said the operator had made an unsuccessful first-round bid for Russell and would consider other opportunities to expand in the sector.

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The move indicates a shift in strategy by exchanges. Previously they tried to expand by running other exchanges globally; now the focus is on building a portfolio of financial services with the exchange at its centre. Exchanges also have credible brands that are crucial in getting indices and benchmarks widely used.

Tom Kloet, chief executive of Canadian exchange operator TMX Group, said: “First and foremost, we see ourselves as a financial services infrastructure company, that so happens to own a stock exchange, as well as a host of other businesses.”

Exchanges’ move into indices is facilitated by businesses becoming available as banks retreat from the sector because of increased regulation, in part due to a series of scandals over benchmarks being rigged.
Among the new rules looming are some from the European Commission, although the timetable has been disrupted by the recent European elections.

Earlier this year UBS passed many responsibilities for its commodity indices to Bloomberg and also sold its Australia bond index business to the data firm.

The Barclays index business manages benchmarks including the US Aggregate Bond Index and other indices acquired as part of the bank’s acquisition of assets from Lehman Brothers after its 2008 collapse. Reuters reported last year that Barclays was considering a sale of the division.